Should I buy a 20 year old appliance repair business?

[biophase]

A business guy from NYC recently told me "If I were selling a 20 year old business, I'd be asking for millions, not thousands." Makes sense, but we're also talking NY vs small town AR.

Your statement here is flawed. Just because you are in AR you can't make a million dollar business in 20 years? Come on.

If you gave me your business today, You better bet I would not be only in a small town in AR in 2037. That's a limiting belief.

In 20 years you could/should be in 48 states or the number #1 online ecommerce store selling appliance parts. Think about it.

Don't ever think like that again.

 

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[Vigilante]

I'm not understanding. He needs to sell it so he can retire. That means he has to be present to run the business. That means whoever buys it from him would have to be present to run the business. Why would you want to buy your job? So that when you get to be an old man you can sell it and finally retire?

 

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[G-Man]

You're buying a job from a dude that bought himself one 20 years ago. Let that depression sink in for a second.

I'm watching my dad go through the process of trying to sell his job so he can retire. It's painful. You don't wanna be that guy.

I almost bought myself a job this week, and probably would have gone through with it if the business broker hadn't been a dick. Due to some temporary mental illness, I was going to buy a coin laundry and renovate it for "passive income". Except,... I would have spent at least a year driving 20 miles across the metroplex in work traffic every morning to spend time there before driving another 15 miles to another end of DFW to my 9-5.

Sometimes, when you're about to punish yourself with bad decisions, it's nice to have people here that point out that they are.... bad decisions.

 

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[JustKris]

I don't really see the benefit in buying a non-scalable business with no recurring revenue, no unique product, and still would require tons of work on your part. (I mean, I guess you could start an appliance repair franchise model, but you don't need this guy's business to do it.)

If this guy closes up shop, wouldn't you be getting all of his customers anyway? And couldn't you just apply his autonomous system to your own business?

 

[biophase]

What's intriguing is the potential. The business has tons of name recognition in the area and there are many things the current owner does that I can do better.

I'm not sure it's worth buying a 20 year old business where the owner is making just a little more than what we've been able to make in less than 5 years.

Makes no sense.

The business has TONS of name recognition... yet in 20 years is making just a little more than your business which has less name recognition...

Doesn't add up. Who's name are you keeping?

Seems like a dying business or slow lane forever business. Save the money you don't have.

 

[GuestUser450]

The business also has a system in place that has good potential for being autonomous. It would allow me to leapfrog a few steps in the growth of my current business.

I'd be very surprised if you couldn't create a similar/better system for less than $100k.

The business has tons of name recognition in the area

Normally, I'd argue that name recognition is worth a lot, but for owner-operators in small towns - it's often different. People might be going to him. He might have name recognition. That wouldn't be transferable.

 

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[Camaro68]

Guy is asking $200K and you say it's worth around half that, so $100k.

If this guy retires and his business slows, answer me this.

If you take that $100k and invest it into your own business via marketing, new technology, space etc. What are the odds that you'll take all his business or significant market share? I'm always hesitant to buy someone elses business unless it's clearly worth it and saves me a tremendous amount of time. I would think that if you spent the $100k (probably actually less, you'd be surprised) and went on a marketing binge, website, flyers, billboards, radio ads, lettering on a panel truck, awesome website with ads on FB and Google search that you wouldn't put this old timer out to pasture. I would think that you could get better results by investing that money in your own business at your own pace, rather than buying another business that has some advantages but nothing you cant do yourself, and better. I'd look there first.

Most of these small businesses are terrible marketers. For instance look around at lawn care, appliance repair, towing etc any business like that in your area. The websites are pathetic if they even have one. Unprofessional marketing, poor appearance when they show up, unreliable etc. With a decent plan you could steal a majority of their market share in months, land one on their chin and get them on the run. The problem is many are slowlane and require a significant amount of time and energy devoted to do it, that's what I don't like about it, and the lack of competitive advantage over another guy. You're already in the business and assumed you know it well, so that part is done. I would blitz him in marketing with flyers (cheap) and invest in a quality website and ads to potential customers and I bet his numbers drop off. As already stated, if he has been in business for 20yrs and is doing similar numbers than IMO what he is doing isn't working and isn't worth buying. If he cant sell and is going to retire, his business will drop off anyway, wither and go away. Don't pay for anything you can TAKE by being smarter and hustling, if its what you want TAKE IT.

 

[Denim Chicken]

Well, if you had 200k in cash would you be able to grow your business to bigger and better than if you were to buy his?

 

[amp0193]

Your statement here is flawed. Just because you are in AR you can't make a million dollar business in 20 years? Come on.

#walmart

 

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[MidwestLandlord]

With service businesses don't forget some % of customers are there because they know the guy in charge or somehow favor him. Once he's gone then so are they. Or at least they're back on the market shopping around which leaves you in the same spot you're already in.

This. ^^^

Electricians.
Therapists.
Plumbers.
Appliance repair.
HVAC

Most all of these "by the hour" service businesses...

The owner IS the business.

Especially in a small town, with a guy only doing peanuts in revenue after 20 years. Likely he is one of these "knows everybody" type of guys, and that's why people use him.

He leaves and his customers leave. At that point whomever has the best marketing/reputation/convenience/service wins.

So...the exact same position you're in now. There is NOTHING that will turn his gross revenue into YOUR gross revenue, is there?

His gross sales, and his net profit mean NOTHING if you can't keep his customers.

Downsides:
"affordable" rent of this freshly paid off building (a liability you don't currently have)
Loss of his customers (could be 100% loss)
Debt service on the loan
Expenses related to employee's, vehicles, etc (would his employees stay on??)

Upsides:
One less competitor (although a guy only doing low revenue after 20 years is hardly competition haha)
???????

My opinion:

If you aren't saying "F*ck Yes!" to buying this, then DON'T.

Trust your gut.

 

[MidwestLandlord]

It may not be worth 200k to learn their system when I can figure it out on my own.

20 years in business, and not much to show for it...

...he doesn't have a system.

 

[Camaro68]

Amazing insight. Thank you. You're right. That 100k can go towards taking what he hasn't been able to capitalize on. O my problem is I don't have 100k. How would you suggest I ramp up the marketing when we're making just a little more than enough to pay ourselves?

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I would bootstrap it man. Go on Facebook and find local pages (for instance my hometown, smaller than yours, has a page that locals share tips on or recommendations) post on the page offering services. Make sure your personal FB page is clean and professional, no drunk pictures, think like a gentlemen. Make a page for your business, post pictures, let all your friends know. Don't underestimate the power of flyers, print one up that looks professional and place them strategically throughout your area. Cold call realtors or landlords. Look at property management businesses that manage a ton of properties and offer your services. Offer discounts to customers who refer you to a friend, get involved in local clubs or organizations to network with others and spread the word. There are a TON of sweat equity methods to get your name out there, and at the end of the day, a satisfied customer is the best advertising. Letter your truck or print of signs and start to staple them on telephone poles, think outside the box.

There are more ways to market and spread the word than paying for a radio ad, or paying FB. If you do all this in your spare time the ROI is unbeatable. You should carry cards with you, drop them everywhere and on every bulletin board. Hand them out left and right, eat breathe and sleep it. If you read about numerous businesses that started from nothing, they all focused 100% on getting the people informed and making them happy. That's the name of the game. You should have the mindset that if the house is on fire, and the fire dept comes, someone on the dept is leaving with a new appliance....that much dedication. I remember reading about Ms. B, the 80 something yr old lady that Warren Buffet bought a furniture business from, she was unstoppable and had that level of dedication and determination. No reason why you cant beat the "other guy" because it obviously sounds like he isn't on that level and has never been. Beat him the old fashioned way, and once that starts working, you can afford to spend a couple bucks and beat him the new age technology route. If someone held a gun to your head today and said, if you don't put your business name in front of 20 new people today that didn't know about it yesterday, or I pull the trigger...you'd figure out a way right? Think like this EVERY DAY.

Mailman walks up to drop off envelopes at the house, "hey hows it going today? Yup another hot one! Hows your (washer/Dryer etc) doing?" He'll probably give you a funny look..."Just mentioning I operate an appliance servicing business, if you ever need anything or know anyone who does let me know, I'll take care of you, and I offer a full gaurentee (hand him your card)"...BOOM done

He now knows you exist and what you do, he'll think about it the next time one of his coworkers complains that the washer died, and he feels like you are going to give him personal service that he wouldn't get at "SUPER JUMBO EXPENSIVE APPLIANCE MART".

Now wash, rinse and repeat (pun intended)...seriously do that with everyone you meet. Your friends/girlfriend etc should be SICK of hearing you pitch your services to everyone you meet. View it as a personal vendetta to take the other guys business...if you want to win

 

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[tonyf7]

I own a two man appliance repair and used appliance sales business with my uncle. It's definitely a slow lane business. We've been at it for almost 5 years and have seen some success, but still, it pretty much just pays the bills (most of the time).

Recently I was approached by the owner of a local appliance repair/parts dealer here in town (small town, like 100k-200k population) who wants to retire and sell his business. He wants 200k for it. I gathered his last 3 years tax returns and had the business appraised with the help of Richard Parker of Diomo Corporation. Richard has been buying and selling businesses for a long time and I bought his $100 course, which is very detailed, but was definitely over my head in some areas. So I emailed him and he helped me free of charge; sweet.

Anyways, the business is only worth about half the asking price and the income I'd be making by purchasing this business would only be slightly higher than what my uncle and I currently gross. And that's just the two of us with very little overhead.

I'm not sure it's worth buying a 20 year old business where the owner is making just a little more than what we've been able to make in less than 5 years. I'd be getting into debt by purchasing the business and inheriting all the overhead, just to make a few cents more than I do now.

What's intriguing is the potential. The business has tons of name recognition in the area and there are many things the current owner does that I can do better. The business also has a system in place that has good potential for being autonomous. It would allow me to leapfrog a few steps in the growth of my current business. I may very well be able to grow this business into something great that can potentially run itself with very little time and effort required from me.

Or I could grow my current business and find a way to Fastlane it.

That's the dilemma I'm having.

Your thoughts?

 

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[Chazmania]

With service businesses don't forget some % of customers are there because they know the guy in charge or somehow favor him. Once he's gone then so are they. Or at least they're back on the market shopping around which leaves you in the same spot you're already in.

I'm sure you could use a fraction of that dollar amount and generate the same revenue yourself.

I wouldn't buy it unless you're getting it for peanuts.

 

[Hyrum]

Yea, that's what bugs me the most. After 20 years he should be making more.

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My guess is he hasn't increased his prices in 20 years, which might be why a lot of people still use him. So you might want to factor in how market-adjusting your rates after a buy-out will affect customer retention.

 

[Chazmania]

I worked as an appliance tech in the past and I was also thinking of starting up my own repair service. This was about 5 years ago and I decided against it to pursue current business concepts but it's actually a great business and lucrative if priced right. It serves a need and there's money in it for sure.

I think you should just utilize good marketing and fast-lane concepts and grow it yourself.

 

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[lewj24]

Sounds risky with little upside in my opinion.

Also if he is retiring and wanting to get out of the business doesn't that give you leverage to low-ball him? Who cares what "it's worth" tell him you can do 50k and he'll have to take it. Unless others are offering him more (doubt, since he approached you).

Actually you say he is going to charge you rent? That's how he plans on retiring. Tell him you will take the business for free and pay the rent so he can retire. I bet he has no other options.

 

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[tonyf7]

You're buying a job from a dude that bought himself one 20 years ago. Let that depression sink in for a second.

I'm watching my dad go through the process of trying to sell his job so he can retire. It's painful. You don't wanna be that guy.

I almost bought myself a job this week, and probably would have gone through with it if the business broker hadn't been a dick. Due to some temporary mental illness, I was going to buy a coin laundry and renovate it for "passive income". Except,... I would have spent at least a year driving 20 miles across the metroplex in work traffic every morning to spend time there before driving another 15 miles to another end of DFW to my 9-5.

Sometimes, when you're about to punish yourself with bad decisions, it's nice to have people here that point out that they are.... bad decisions.

Definitely grateful for everyone on here offering their input. Tons of clarity for me.

The fact is I already own a job in the business I created with my uncle. Buying a bigger job while getting into debt doing it sounds ridiculous now.

I'm better off putting my energy towards turning my job into an actually business.

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[tonyf7]

If you think you would have the time to manage this new business as well as your current business with your uncle, what I see is that you aren't putting enough hours into your current business. Hence why it is slowlane and "pretty much just pays the bills (most of the time)."

I wouldn't manage both business. I would combine them. But you're right, I don't put enough hours into my current business. I pick my kids up from school everyday.

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[tonyf7]

Makes no sense.

The business has TONS of name recognition... yet in 20 years is making just a little more than your business which has less name recognition...

Doesn't add up. Who's name are you keeping?

Seems like a dying business or slow lane forever business. Save the money you don't have.

Yea, that's what bugs me the most. After 20 years he should be making more.

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[tonyf7]

This. ^^^

Electricians.
Therapists.
Plumbers.
Appliance repair.
HVAC

Most all of these "by the hour" service businesses...

The owner IS the business.

Especially in a small town, with a guy only doing peanuts in revenue after 20 years. Likely he is one of these "knows everybody" type of guys, and that's why people use him.

He leaves and his customers leave. At that point whomever has the best marketing/reputation/convenience/service wins.

So...the exact same position you're in now. There is NOTHING that will turn his gross revenue into YOUR gross revenue, is there?

His gross sales, and his net profit mean NOTHING if you can't keep his customers.

Downsides:
"affordable" rent of this freshly paid off building (a liability you don't currently have)
Loss of his customers (could be 100% loss)
Debt service on the loan
Expenses related to employee's, vehicles, etc (would his employees stay on??)

Upsides:
One less competitor (although a guy only doing low revenue after 20 years is hardly competition haha)
???????

My opinion:

If you aren't saying "F*ck Yes!" to buying this, then DON'T.

Trust your gut.

I'm definitely not screaming F*ck yeah about it. I think a part of me wondered if could make this business into a great one. But when considering all the debt I'd be getting into and the fact that I can grow my current business into something great, it doesn't make sense.

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[tonyf7]

Well, personally I'd never go in to debt for anything and second I never give anyone their asking price for anything. But looking at this from a different angle than those 2 things, it's a tough call. You are an hour and a half (without traffic) from most of the Memphis population so expanding that far is out of the question. I guess my question would be, does he have anyone else that would be remotely interested do you think? What types of systems does he have in place that you don't currently have? What can you do better than him? If you want to send me a private message feel free.

Seems he's been trying to sell his business for a while now and no one is buying. Partly because there's a shortage of buyers in the area. Not many people know about appliance repair here.

The systems he has in place are mainly software programs they use to track the repair technicians that are out in the field. It's something that anyone can be taught to do. That's just one example.

What I can do better is utilize the internet to bring in more business. They don't advertise. They also don't sell used appliance. Something my uncle and I are good at.

I hate debt as well btw.

 

[Choate]

If you think you would have the time to manage this new business as well as your current business with your uncle, what I see is that you aren't putting enough hours into your current business. Hence why it is slowlane and "pretty much just pays the bills (most of the time)."

 

[tonyf7]

And couldn't you just apply his autonomous system to your own business?

Yes, I could. As of now I wouldn't know where to start but I'm sure I can find out. It may not be worth 200k to learn their system when I can figure it out on my own. I see your point. But I'd also be spending a lot of time learning instead of earning.

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[tonyf7]

Man, you never go into debt ever... like worst words of advice.

Anyway, to the original poster, honestly, $200,000 for his companies name, for very little upside, doesn't really make much sense to me. But there is a lot we are not seeing here either.... Does that $200,000 include $150,000 in inventory? What about property/lease? rentals? ect?

What does that $200,000 get you?

Because from the sound of it, it's not getting you much, and not increase your bottom line. Unsure what rates you can borrow at where you are, but I'm assuming for business loan like that over 5%? Or would you HELOC your home to get it?

Assuming 5% interest on $200,000 that's $10,000 a year in interest costs alone. How much more revenue can that business generate over that?
If it's $200,000 with $150,000 in inventory, that you can easily sell/whatever, but you get that name which you can then leapfrom and build up way bigger business, then it might be worth it.

but ultimately there isn't enough info to really make a good case here.

Forgot to mention that the owner offered to finance the whole deal. He has about 200k in inventory. How much of that is sellable, who knows.

He owns (and just finished paying off) the building where the business is located and is willing to keep rent affordable.

I just don't know if it's worth going into debt over. I'm essentially buying a name, and I'm not sure that name is really worth it. With a little more time and effort I can build my own name up.

I'm also scared of all the debt and responsibility of having rent, employees, vehicles, parts suppliers, etc. It's a big jump from the two man show I currently run.

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[tonyf7]

Well, if you had 200k in cash would you be able to grow your business to bigger and better than if you were to buy his?

Yes, I would. Maybe that's what I should focus on. My business.

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[minivanman]

I sent you a private message but just so you know, there is a guy here in the north Dallas area that works from behind his house, no carport. His 2 guys deliver a minimum of 15 sets every day, 7 days a week. So don't have any shame about working under a carport.

 

[tonyf7]

I sent you a private message but just so you know, there is a guy here in the north Dallas area that works from behind his house, no carport. His 2 guys deliver a minimum of 15 sets every day, 7 days a week. So don't have any shame about working under a carport.

Oh, no shame at all. I love telling people our story of how we got started under a carport. I take pride in it because of how far we've come. [emoji4]

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[ZCP]

What is the name and customer list worth?
Offer him an 'earn out' based on profit.
Make it worth your while.
Use it as the foot in the a$$ you need to go from 'working a JOB' to business owner. (this might be the most valuable $100k you ever spend!!)

 

[minivanman]

Well, personally I'd never go in to debt for anything and second I never give anyone their asking price for anything. But looking at this from a different angle than those 2 things, it's a tough call. You are an hour and a half (without traffic) from most of the Memphis population so expanding that far is out of the question. I guess my question would be, does he have anyone else that would be remotely interested do you think? What types of systems does he have in place that you don't currently have? What can you do better than him? If you want to send me a private message feel free.